chapter
1
The ‘Brewing’ of Insomnia1
Aileen Murphy and Thomas N. Garavan2
INTRODUCTION
It is 19 April 2008 as Bobby Kerr, CEO of Insomnia, gazes out the
window of his headquarters overlooking St Stephen’s Green in Dublin
and contemplates the events of the past year. It had been no ordinary
year. He sold the Newpark Hotel, the family business of which he was
chairman, for €23 million. In addition, a 51 per cent stake in Insomnia
was sold by the existing shareholders (including Bobby himself), valuing the company at €16 million, to an Icelandic conglomerate called
Penninn. As he watches shoppers, business people and students bustling past, he considers the international expansion through the
Penninn alliance as the next chapter in Insomnia’s story. Let us now
look at how Insomnia got to this point.
Insomnia (the trading name of Red Coral Catering Ltd) is the leading independent premium coffee and sandwich retail chain in Ireland.
With fifty-nine shops, Insomnia is currently the market leader in
branded coffee outlets, accounting for 26 per cent of this segment of
the Irish market (Euromonitor International, 2009a). Insomnia has
grown organically through acquisitions and the development of
This case was written as a basis for class discussion rather than to illustrate either
effective or ineffective handling of an administrative situation. The authors would
like to thank the staff and management of Insomnia. A particular word of thanks
is due to Mr Bobby Kerr for his very generous time and assistance in producing
this case. The interview with Mr Kerr was conducted on 17 July 2008 and forms
the basis of the primary research in this case.
2
Ms Aileen Murphy is a lecturer in Hospitality Management at Waterford
­Institute of Technology. Professor Thomas N. Garavan is associate dean of Postgraduate Studies and Executive Education, Kemmy Business School, University
of L
­ imerick.
1
7
Managerial Challenges in Irish Organisations
r­ elationships with partners. The company has twenty-two outlets on
the high street, nine concessions and twenty-eight Spar barista ­in-store
franchises. A key component of the company’s business lies in its partnerships with Spar, Meadows & Byrne, Gardenworks and University
College Dublin (UCD). Insomnia is the fifth fastest growing coffee
chain in Europe (Allegra Strategies, 2007), trebling turnover in five
years to achieve 2008 earnings (before interest, tax depreciation and
amortization) of €1.6 million on revenues of €13.3 million. Shareholders’
funds currently stand at a healthy €5.4 million. This case study outlines the company’s highly successful development and growth from
humble beginnings as one small concessionary outlet to a high profile
brand and market leader.
Since its establishment in 1997, the company has been predominantly Dublin based, with fifty-one of its outlets located in the capital.
There are a further two stores in counties Meath, Kildare and Louth
and one store in both Cork and Wicklow. The company’s approach to
location choice has been to cluster its stores in affluent areas of high
footfall, such as urban areas and shopping centres. Insomnia currently
employs 170 staff and its workforce is multicultural. As can be seen
from Figure 1.1, the organisational structure is flat. The very strong
senior management suite comprises Bobby Kerr, chairman; Chris
Foxton, chief executive officer; Harry O’Kelly, operations director;
and John Clohisey, non-executive director. Insomnia’s directorship
blends industry experience, business nous and management talent
together with the entrepreneurial flair which has guided the company
through exponential growth to its current position as market leader.
COMPANY BACKGROUND
Insomnia was originally established in 1997 by four independently
successful Irish entrepreneurs: Derek Hughes, owner of the Hughes &
Hughes bookshop chain; Brian Goff, owner of the La Croissanterie
franchise; Mark Duffy, an information technology businessman; and
Niall Wiseman, an architect and builder. The four men collectively
identified an opportunity to exploit the rapidly growing market for
premium gourmet coffee. The first Insomnia outlet opened in 1997 in
the Hughes & Hughes bookshop in Galway. Four shops followed in
Dublin before the 2001 acquisition of the Bendini & Shaw sandwich
chain, owned by Harry O’Kelly, which added a further five shops to
8
Accounts
Lenka Stankova
Accounts
Denise Bianchi
Accounts Manager
Mary O Shea
STORE MANAGERS
Operations Manager
Radka Smiskova
Chris Foxton
CEO
Sales & Marketing
Manager
Marojolein Ten Berge
Franchise Operations
Manager
Operations Director
Harry O Kelly
Instore Machine
Manager
Ronan McCullough
Figure 1.1: Organisational Chart
The ‘Brewing’ of Insomnia
9
Managerial Challenges in Irish Organisations
the ­company’s growing roster. Furthermore, the Bendini & Shaw
acquisition provided a complementary sandwich and food product
offer to its premium coffee. This product expansion quickly proved
successful as it provided customers with a convenient one-stop shop
for coffee and snacks.
In 2004 Insomnia bought out the Perk chain, which comprised five
coffee shops. Perk was founded by Bobby Kerr, who, speaking about
his rationale for selling the company, said, ‘I decided it would be
better to be a smaller part of something bigger than a big part of
something small’ (Kerr, 2008). Following the sale, he was asked to
become chief executive and has piloted Insomnia’s subsequent growth.
In the same year, the company raised €4 million in funding to facilitate expansion; this comprised a €2 million share issue to new and
existing shareholders and €2 million in debt finance. The new shareholders who joined Insomnia at this time were Chris Foxton and John
Clohisey. John is a major shareholder in BWG Foods, which holds the
Irish Spar and Mace franchises. The founding shareholders exited
Insomnia in 2005 to pursue their other business interests.
This early growth and strong financial position provided a solid
platform for aggressive expansion. The initial capital requirement of
a typical coffee shop falls in the region of €200,000, though this can
climb to as high as €350,000 depending on unit size. Each Insomnia
branch is fitted out to very high specification, creating that all-­
important atmosphere of comfort and informality for customers. The
creation of this ‘third space’ between work and home is an international trend which Insomnia has successfully tapped into. Business
people, students and shoppers regularly use Insomnia stores to meet,
work or relax. All units are equipped with free Wi-Fi to provide customers with convenient access to email and internet. The company
also has a state-of-the-art website, www.insomnia.ie, which keeps the
public up to date with the latest news. This evolution of the Insomnia
concept and its rapid expansion is a testament to the business acumen
of its senior managers.
Indeed, Insomnia has grown to become ‘Ireland’s leading coffeefocussed chain and pioneer of the market’ (Allegra Strategies,
2007: 131). How has it achieved this? By filling a gap in the market and
providing the consumer with a credible indigenous brand, and by
offering premium-positioned quality coffee and snacks. Insomnia contributed to meeting the demand in the market for quality take-out
10
The ‘Brewing’ of Insomnia
coffee and food, and has continued to grow and thrive despite both
Starbucks and Costa Coffee entering the Irish market in 2005. In addition to its burgeoning coffee shop business, Insomnia identified the
retail sector as being both an important growth avenue and a potential
competitor source. This led to a key decision in 2006 to enter retail
through a ground-breaking relationship with Spar. John Clohisey has
been hugely instrumental both in developing Insomnia’s relationship
with Spar and in relation to the early identification of new opportunities with key landlords and property developers. Insomnia developed
the barista concept within Spar, which now accounts for twenty-eight
of the fifty-nine shops – almost half its outlets. The barista model,
which is set to expand rapidly, with five to six units opening in 2010,
is essentially a scaled-down version of the typical Insomnia coffee
shop. The company also provides an innovative self-service bean-tocup machine to seventy Spar shops, providing the convenience market
with access to a fresh, speedy and high quality coffee product.
The year 2008 saw the company’s first major business development
since Insomnia’s acquisition of Perk in 2004. As mentioned, in January,
Icelandic conglomerate Penninn purchased a 51 per cent stake in the
company, valuing Insomnia at €16 million. Penninn is a major diversified group with interests across retail, coffee roasting and distribution,
office supplies and bookshops. Both parties to the deal availed of third
party counsel in relation to the transaction: Key Capital advised
Insomnia while Kaupthing Bank of Iceland advised Penninn. So what
advantages did Penninn secure for their sizeable capital injection? For
such a large and diversified group, the unique benefit in the Insomnia
investment lay in the quality, innovation and drive of the existing management team. The Icelandic group, for all its coffee connections, held
little expertise in managing coffee chains, an area it had identified for
future growth and development. Buying into Insomnia provided
Penninn with immediate access to best-in-class industry expertise and
a strong brand to potentially roll out across the growing European
coffee markets. Commenting on the investment in Insomnia, Penninn
Group CEO Kristinn Vilbergsson said,
We recognise that Insomnia is a great brand with universal
translation and excellent export potential. I am particularly
excited about working with the current Irish management
team who will retain responsibility for driving the brand both
in Ireland and across Northern Europe. (Insomnia, 2008)
11
Managerial Challenges in Irish Organisations
Insomnia’s four largest individual shareholders (Bobby Kerr, Harry
O’Kelly, Chris Foxton and John Clohisey) reinvested €6 million
of the proceeds from the sale back into the business and now own
49 per cent of the new entity between them. Around the same time, a
number of minority shareholders were bought out for approximately
€3 million. Speaking about the deal, CEO Bobby Kerr said:
We are delighted with the deal which reflects the success of
the company in pioneering the branded coffee retail concept in
Ireland. There are very significant synergies between ourselves
and the Penninn Group, which we will aim to maximise over
the coming months toward replicating the Insomnia experience in the European market. We are particularly proud and
excited about the prospects of seeing our Irish brand having a
multinational presence. (Insomnia, 2008)
However, given the global economic crisis that began in 2008, much
has changed since then. The economic meltdown in Iceland has been
of particular relevance to Insomnia, with Penninn going into liquidation in March 2009. Penninn’s assets, including its 51 per cent stake
in Insomnia, are now owned by the Icelandic bank Kaupthing.
Insomnia is currently at an advanced stage of negotiation with
Kaupthing to buy back this stake.
THE INSOMNIA BRAND
Originating from Greek mythology, Insomnia brand imagery has
recently moved to a more cosmopolitan, urban-influenced aesthetic
but still retains many of its early features. Both the Insomnia name
and logo have proved extremely successful and popular with customers
and have ultimately changed little in the last thirteen years. Research
undertaken by Boucher and Kavanagh (2007) found that Insomnia is
one of the most popular coffee shops in Dublin and is a well-known
brand. Indeed, when consumers were shown the company logo of a
cup with wings without the brand name attached, 88 per cent recognised the logo as being Insomnia’s. Even among non-customers,
81 per cent recognised the Insomnia logo. The research also found
that 84 per cent of customers regard Insomnia as a brand that they
trust. In addition, 64 per cent of customers would recommend
Insomnia to a friend.
12
The ‘Brewing’ of Insomnia
The Insomnia name and logo communicate to customers how big
and bold the unique coffee blend is. The cup with wings promotes a
strong, beautifully sweet liquid which will pick people up and provide
a cup of wonderful energy. Indeed, many customers comment on the
positive quirky image associated with the notion that you will not
sleep after a cup of Insomnia coffee. The brand conveys to customers
the idea of strength in a cup to get them through their day. The
signature colours of the yellow logo on a red background are eye
catching and stand out among competitors on the high street. Indeed,
customers comment that they use Insomnia shops as a landmark
when meeting friends.
According to Allegra Strategies (2008), brands need to target more
refined customer segments, something which Insomnia appears to have
firmly under control; the company uses a number of variables when
segmenting the market. An important classification is whether purchases are for in-house or take-out consumption. Indeed, the company
designs its stores to match the profile of the target market. In Spar, by
way of illustration, the Insomnia barista units are designed to meet the
needs of the convenience customer who essentially wants to grab their
purchases and go. A similar pattern is exhibited in city centre locations
and business districts such as the Pembroke Street shop where approximately 60 per cent of business is take out. The opposite pattern is
­demonstrated in Gardenworks concessions where business is largely
weekend-led and there’s little or no take-out business. Here, customers
want to linger, so shops are larger with lots of comfortable seating.
Insomnia also segments the market according to usage rate. Loyal customers are those who have visited an Insomnia coffee shop eight to ten
times out of their last ten visits to a coffee shop. Occasional customers
are those who visit an Insomnia coffee shop at least once a month. Noncustomers are those who do not visit an Insomnia coffee shop at least
once a month but who visit a competitor at least once a month.
Insomnia’s target markets tend to be concentrated in urban areas
of high footfall and consist of those in the ABC1 social classes. The
company appeals to a wide age range, with the thirty-five to fiftyfive age bracket being a particularly important group. Insomnia is
also popular with consumers in their late teens and early twenties.
The company attracts an equal proportion of men and women.
Insomnia’s customers can be further categorised into the following
segments: business, student, suburban, retail, leisure and Spar.
13
Managerial Challenges in Irish Organisations
Research undertaken by Boucher and Kavanagh (2007) investigated
the factors which influence consumers to choose Insomnia. Con­
venience of location was the most important factor for consumers
when choosing a coffee shop. Both loyal and occasional customers
agreed that convenience of location was the primary reason for visiting Insomnia. Non-customers stated that the reason for not visiting
was the lack of Insomnia coffee shops close to where they either lived
or worked. Overall, both customers and non-customers regarded
Insomnia outlets as very conveniently located, giving an average score
of 8.2 out of 10 on this criterion. Other key influencing factors leading
consumers to choose Insomnia were the quality, selection and price of
the company’s product offerings. Customers liked the wide selection of
coffee and healthy food on offer. Insomnia soup was singled out by
customers as being of a particularly high standard: ‘The quality and
selection of their soups is probably the best around.’ Other significant
determinants worth noting were the friendly atmosphere in the coffee
shops, its Fairtrade status, the inherent ‘Irishness’ of Insomnia and
the user-friendly loyalty card system.
Insomnia operates a loyalty scheme whereby customers get one in
every ten coffees for free. Each time a customer purchases a coffee,
their purchase is recorded. The company records the branches in
which individual purchases are made. This has thrown up a number
of interesting micro-buying trends; for example, it’s a frequent occurrence for a customer to make purchases in a city centre shop near
work and also in a unit near where they live when out with their families or friends at the weekend. In relation to when customers visit an
Insomnia coffee shop, 64 per cent visit on weekdays with another
9 per cent visiting at weekends and the remaining 27 per cent visit at
both these times. As can be seen from Figure 1.2, customers tend to
visit early in the day with a peak of 42 per cent of customers visiting
at lunchtime. Approximately one third of Insomnia’s customers
­participate in the loyalty card system, which is very high by industry
standards. Boucher and Kavanagh (2007) found that loyal customers
visited Insomnia almost every time they visited a coffee shop. They
usually went more than once a day and visited on average sixteen
times per month. They were also much more likely to consume their
purchase in-house. Loyal customers were much more likely to choose
Insomnia, even when there was a wide selection of alternative choices.
14
The ‘Brewing’ of Insomnia
Figure 1.2: Times When Customers Visit Insomnia
42%
32%
34%
28%
2%
8 am–10 am 10 am–12 pm 12 pm–2 pm
Base: 250 2 pm–5 pm
After 5 pm
Multiple Responses Allowed
Source: Boucher and Kavanagh (2007).
Indeed, 41 per cent of customers stated that having a loyalty scheme
would entice them to go to Insomnia more.
Ever the innovator, Insomnia was the first retailer to introduce
an electronic loyalty card from ZAPA Technology in October 2009.
The tag operates using Near Field Communication technology. The
ZAPATAG contains a chip which can store a number of different
applications such as multiple loyalty schemes, club memberships and
electronic payments. Users attach the tags to their mobile phones and
register at www.zapatag.ie. The tags can then be swiped at the ZAPA
reader beside cash registers, allowing customers to gain and record
loyalty. The launch of ZAPATAGS in all Insomnia outlets is the largest
commercial deployment of Near Field Communication in Europe. This
next-generation contactless technology is expected to be integrated
into all mobile phones in the future. The technology has proved
popular, with 12,000 Insomnia customers participating following its
introduction. Customers earn two points for every euro spent and
each point is worth 1 cent. Accumulated points can then be redeemed
as a discount when making a purchase in participating Insomnia
15
Managerial Challenges in Irish Organisations
stores. An important benefit of this technology is the market intelligence that it can provide. In addition, this type of customer loyalty
automation is more cost effective than the corresponding credit
card technology.
EXPANSION PLANS
Insomnia had ambitious plans to expand overseas, which have now
been put on hold. Given Penninn’s connections in Northern Europe,
Insomnia had identified Finland as providing the location for the first
stage of its European expansion. Starbucks hasn’t yet entered Northern
Europe so an opportunity exists to become established in these markets unhindered by this competitive element. According to Allegra
Strategies (2007), Finland has the highest per capita consumption of
coffee in Europe at 11.96 kg. This is supported by strong filter coffee
consumption. Café culture is already well established in Finland, with
the market dominated by traditional independent cafés of which there
are in excess of 10,000 outlets. The branded coffee shop market in
Finland is currently small but growing at an annual rate of 14 per
cent. As can be seen from Table 1.1, there are three major players in
the branded market. The market leader is the Finnish-owned Robert’s
Coffee, followed closely by Swedish chain Wayne’s Coffee. Typical
Finnish coffee shop consumers are students, young professionals and
tourists. The most likely route into Finland for Insomnia would have
been to acquire an existing small operator and add additional outlets.
In the Finnish market, between forty and fifty outlets are required for
a company to reach critical mass. If at some stage in the future the
brand is to be exported internationally, Insomnia plans to conduct a
brand audit which will cost approximately €40,000.
Given the current economic environment (2010), much of Insomnia’s
international expansion plans have been put on hold for the moment,
but that does not mean they won’t be revisited in the future. However,
Insomnia intends to continue to open new units in the Dublin area
and expand into the regions mainly through the agreement with Spar.
Regional development will require a significant investment of time,
planning and finance. The company has a strong presence in Leinster
and Cork and is actively looking at Kilkenny, Galway and other urban
centres to expand into.
16
The ‘Brewing’ of Insomnia
Table 1.1: Major Branded Coffee Bar Operators,
Finland, 2006 and 2007
No. of
Outlets
April ’06
No. of
Outlets
Oct ’07
Robert’s
Coffee
25
27
• Coffee shops offering a selection of
gourmet flavoured coffees and teas
to drink in or take away.
• Brand of Finnish coffee roaster
founded in 1987.
• Coffee beans sold in store for
in-home consumption.
• Offers Fairtrade and organic
products.
• Also stores in Sweden (9),
Estonia (2) and Denmark (1).
• www.robertscoffee.com
Wayne’s
Coffee
18
22
• Swedish-owned coffee chain
serving hot and cold beverages,
fresh sandwiches and pastries.
• In-store baking facilities.
• Coffee and food delivery service.
• Also stores in Sweden (50),
Estonia (5), Poland (2) and
Russia (1).
• www.waynescoffee.fi
Coffee
House
10
15
• US-style branded coffee shop chain
serving a selection of speciality
coffees.
• Extensive food offer including
sandwiches, pies, wraps, paninis,
muffins, cookies and cakes.
• Predominantly eat-in but offers a
take-away service.
• Attracts young urban consumers.
• Brand of catering group: HOKElannon Ravintolat.
• www.coffeehouse.fi
Total
Branded
Market
53
64
Growth April 2006 to October 2007:
11 outlets
Annualised Growth: 13.8%
Operator
Details
Source: Allegra Strategies (2007).
17
Managerial Challenges in Irish Organisations
THE INSOMNIA MISSION STATEMENT
Insomnia is committed to the development of a national brand with a
reputation for providing customers with value for money. The company is focused on maintaining the highest levels of customer service
and delivering ‘the best cup of coffee in whichever format you choose,
every time you visit a store’ together with a range of freshly prepared
food options in an efficient and friendly manner by dedicated staff.
Insomnia achieves these lofty criteria through strict and unrelenting
adherence to quality procedures, on-site monitoring through external third parties, ongoing training and development, and immediate
and proactive response to client issues. As the business has grown in
scale, the company introduced an operations manual in 2007 in order
to ensure the same Insomnia experience across all of its stores. Today,
Insomnia is recognised as a truly professional service, representing
standards of excellence and quality which are reflected in its company and brand values.
Insomnia Company Values
●●
●●
●●
●●
Insomnia will accept full responsibility for its actions.
Insomnia will be respectful of others and treat all people with
equality and dignity.
Insomnia will encourage quality and innovation relative to products, processes and people.
Insomnia is committed to working to guarantee a better deal for
Third World producers of its coffee beans. (Insomnia, 2007)
INSOMNIA’S CONCESSION MODEL
The diversification into a concession model has been a key element of
Insomnia’s successful development, giving the brand broader exposure within the Irish coffee market without conceding quality control
or losing any hard-earned brand integrity − an undoubtedly difficult
proposition. So how was this achieved? Insomnia has concessions with
UCD, Meadows & Byrne and Gardenworks. In these consessions
Insomnia seeks to attract already semi-captive customers. The company’s model sees it paying a percentage of sales to the shop owner
and it also contributes towards the fitting out of the in-store area,
18
The ‘Brewing’ of Insomnia
ensuring no shortcuts are taken on the branded look and feel. (Bobby
Kerr’s background in the Campbell Bewley Group was integral in the
development of this approach; his experience saw him manage some
thirty café outlets, several of which were concessionary.)
In addition to these concessions, Insomnia maintains one high level
franchise agreement with BWG, owners of the incredibly successful
Spar franchise group and, incidentally, one of the world’s largest retail
chains, with 12,680 stores in 33 countries across 4 continents (Spar,
2009). Under this arrangement, Insomnia is paid a franchise fee and
doesn’t have exposure to capital costs. When the barista concept was
developed, Insomnia initially handled the set up and operation of the
first six units, which were then passed over to Spar. This approach
means that each new unit offers the same quality Insomnia experience
available in the standalone shops. When a new barista unit is commissioned, Insomnia insists on both staff and management being made
available for three weeks beforehand for dedicated training. These
stringent measures represented a key success factor, ensuring strict
criteria were met around the operation and quality control of each unit.
For the typical consumer, this ultimately meant that a cup of Insomnia
coffee purchased in a Spar franchise provided the same high quality
convenient beverage that he or she had come to expect from the brand’s
own stores. This franchise agreement quickly proved successful. In
Spar on Merrion Row, for example, almost as many cups of Insomnia
coffee are sold on a weekly basis as in some of the standalone units.
The company originally had concerns about branching into franchising but careful planning has ensured the arrangement has become
a central development instrument. At the same time, Insomnia is not
locked into an exclusive agreement with Spar, though the company
doesn’t have plans currently to deal with another franchisee. This is
despite numerous approaches by prospective operators hoping to buy
into the Insomnia brand − a further indicator of its ongoing success
and brand awareness. Insomnia’s relationships with its concession and
franchise partners represent an important part of its business and are
an integral part of the company’s success.
KEY MARKET TRENDS AND DEVELOPMENTS
The consumer food service sector in Ireland underwent a transformation during the Celtic Tiger years. Full employment led to increased
19
Managerial Challenges in Irish Organisations
disposable income, longer working hours and a faster pace of life.
Increased consumer spending power combined with busy lifestyles
created a demand for a wide variety of quality convenience food
options. The consumer food service sector evolved to fit this new
environment. In line with international trends, food ‘on-the-go’
became the norm. Snacking became customary as did eating out for
breakfast and lunch. In urban areas in particular, Irish consumers
were willing to pay a premium for quality, convenient food service.
This extended period of affluence encouraged the expansion of specialist coffee shops. Insomnia is widely recognised as having led the
charge in this regard: ‘…it was local chain Insomnia that pioneered
the development of specialist coffee shops in Ireland’ (Euromonitor
International, 2008: 48).
With the advent of economic recession, consumers now find themselves with time on their hands due to unemployment and reduced
working hours. Unemployment currently stands at 13.7 per cent
(Central Statistics Office, 2010), which is a far cry from the heady
days of full employment. Reduced disposable incomes and weakened
consumer confidence has resulted in a contraction in consumer spending on discretionary items. The economic downturn has impacted
significantly on the food service sector. There are fewer workers and
shoppers in urban areas, resulting in lower footfall, and average spend
has fallen as consumers trade down.
Euromonitor International (2009b) found that consumer food service sales in Ireland grew at a compound annual rate of 1.3 per cent in
constant prices over the six-year period 2003−2008 (see Table 1.2).
Significantly, however, there was a fall in sales of 1.6 per cent in 2008
from the previous year. Food service sales are predicted to continue
to fall slightly at a compound annual rate of 0.4 per cent in constant
prices over the six-year period 2008−2013 (see Table 1.3). Euromonitor
International (2010) found that consumption of coffee in the food
service sector in Ireland has grown from 1,563 tonnes in 2004 to
1,695 tonnes in 2009, representing a compound annual growth rate
of 1.6 per cent (see Table 1.4). This is expected to fall marginally at a
compound annual rate of 0.1 per cent over the six-year period
2009−2014 (see Table 1.5).
While Ireland has traditionally been a tea-drinking nation, about
60 per cent of the population now drink coffee (Leatherhead Food
Research, 2009). Irish tastes have become more sophisticated as
20
The ‘Brewing’ of Insomnia
Table 1.2: Units, Transactions and Value Sales
in Consumer Food Service, 2003−2008
Year
2003
Units
2004
2005
2006
2007
2008
15,433.0 15,807.0 16,254.0 16,722.0 16,961.0 16,948.0
Transactions
(mn)
468.1
467.9
466.8
499.1
514.3
515.5
EUR Million
current
prices
4,842.8
4,961.4
5,448.0
5,803.0
5,99.6
6,112.1
EUR Million
constant
prices
4,842.8
4,854.8
5,204.4
5,333.5
5,257.6
5,175.1
Source: official statistics, trade associations, trade press, company research, store
checks, trade interviews, Euromonitor International estimates; Euromonitor International (2009b).
Table 1.3: Forecast Units, Transactions and
Value Sales in Consumer Food Service, 2008−2013
Year
Units
Transactions
(mn)
EUR Million
2008
2009
2010
2011
2012
2013
16,948.0 16,838.0 16,766.0 16,721 16,720.0 16,734.0
515.5
510.1
6,112.1
5,939.5
506.8
505.9
507.2
509.8
5,873.5 5,879.1
5,923.9
5,987.1
Source: official statistics, trade associations, trade press, company research, store
checks, trade interviews, Euromonitor International estimates; Euromonitor International (2009b).
Table 1.4: Volume of Food Service Sales of
Hot Drinks by Sector, 2004−2009 (Tonnes)
Year
2004
2005
2006
Coffee
1,562.7
1,600.6
1,650.9
1,687.6 1,705.7
1,694.7
Tea
1,298.5
1,298.9
1,298.1
1,299.8 1,292.7
1,273.9
7.2
7.2
7.3
2,868.4
2,906.7
2,956.3
Other Hot
Drinks
Hot Drinks
2007
7.3
2008
2009
7.4
7.4
22,994.7 3,005.7
2,976.0
Source: Euromonitor International (2010).
21
Managerial Challenges in Irish Organisations
Table 1.5: Volume of Forecast Food Service Sales of
Hot Drinks by Sector, 2009−2014 (Tonnes)
Year
2009
2010
Coffee
1,694.7
1,692.0
1,690.8
Tea
1,273.9
1,259.9
7.4
7.5
7.5
2,976.0
2,959.4
2,951.3
Other Hot
Drinks
Hot Drinks
2011
2012
2013
2014
1,687.0
1,683.7
1,682.6
1,253.01 1,248.0
1,243.6
1240.5
7.5
7.5
7.6
2,942.5
2,934.9
2,930.7
Source: Euromonitor International (2010).
consumers experiment with gourmet coffee in food service outlets
and at home. This taste for speciality coffee marks a new era in the
Irish hot drinks sector, which is expected to endure. This development
has not been to the detriment of traditional tea options, but rather
through increased availability of gourmet coffee and new coffee drinking occasions. Coffee shops have been instrumental in introducing
consumers to speciality coffees such as cappuccino, latte, macchiato,
Americano and frappuccino. Consumers are still integrating these
new formats into their daily routines. In these economically stringent
times some consumers are likely to switch to replicating these coffees
at home in order to save money. In addition to an evolution in taste
for coffee is a desire for indulgence among consumers who are increasingly choosing gourmet coffees as a treat. Coffee shops offer consumers a range of experiences from a convenient access point to pick up
a coffee through to offering an affordable indulgent treat in a pleasant
comfortable environment. As Ireland moves out of recession, the
social and cultural factors which fuelled the expansion of coffee shops
and coffee drinking in Ireland should continue to gather momentum.
In particular, the outlook seems to favour premium products that
offer indulgence and perceptions of sophistication (Euromonitor
International, 2010).
The Irish market displays many of the characteristics of the UK
branded coffee shop market. There are opportunities in the coffee
shop market from the consumer mega trends of convenience food,
healthy eating, a growing food culture, empowered consumers and
ethical consumerism. Coffee in the workplace is a key growth area.
Innovation will be a valuable corporate competence going forward.
22
The ‘Brewing’ of Insomnia
Table 1.6: Consumer Food Service by Independent vs
Chained Outlets 2008 (Units/Outlets)
Outlets
Independent
Chained
Total
Cafés/bars
8,650
238
8,888
Full-service restaurants
3,124
108
3,232
Fast food
1,563
1,967
3,530
565
175
740
40
80
120
Street stalls/kiosks
433
5
438
Pizza consumer food service
245
260
505
14,375
2,573
16,948
100% home delivery/takeaway
Self-service cafeterias
Consumer food service
Source: official statistics, trade associations, trade press, company research, store
checks, trade interviews, Euromonitor International estimates; Euromonitor International (2009b).
There will also be opportunities for passionate brands that engage
with customers in an authentic manner. These branded coffee shops,
which deliver a genuine customer experience and service excellence,
will be well positioned to capitalise on opportunities in the market
(Allegra Strategies, 2007; Allegra Strategies, 2008). Euromonitor
International (2009b) predicts that chained food service operators
will perform best at the expense of independents. This is due to the
economies of scale chains enjoy and because consumers tend to gravitate towards brands they trust during economic uncertainty. The
number of independentoutlets in Ireland is expected to decline by 4
per cent while chains are expected to grow by 7 per cent by 2013.
Table 1.6 compares the number of independent outlets with chained
food service outlets, while Table 1.7 ranks the branded food service
operators by size. According to Euromonitor (2010), market demand
for coffee in Ireland has not yet reached saturation point, representing opportunities for operators.
Starbucks and Costa entered the Irish market in 2005. Rather than
taking market share away from Insomnia, all three chains experienced remarkable growth; the new arrivals in fact created new
­customers, driving further growth in an already developing market
(Euromonitor International, 2008). Contrary to initial concerns
23
Managerial Challenges in Irish Organisations
Table 1.7: Leading Chained Consumer Food Service
Brands by Number of Units 2008
Brand
Global Brand Owner
Centra
Spar
Londis
Subway
O’Brien’s
Supermac’s
McDonald’s
Fareplay
Insomnia
Abrakebabra
Domino’s Pizza
Apache Pizza
Bagel Factory
Eddie Rocket’s
Musgrave Group Plc
Internationale Spar Centrale BV
ADM Londis Plc
Doctor’s Associates Inc
O’Brien’s Irish Sandwich Bars Ltd
Supermac’s Ltd
McDonalds Corporation
Topaz Energy Ltd
Penninn hf
Abrakebabra
Domino’s Pizza Ltd
Good Food Co Ltd
The Bagel Factory UK Ltd
Eddie Rocket’s City Diner Ltd
Pizza Hut
Four Star Pizza
BB’s Coffee & Muffins
Godfather’s Pizza
Costa Coffee
Burger King
Fitzgerald Pubs
Starbucks
The Bagel Bar
KFC
Timepiece
Butler’s Chocolate Café
McEniff Hotels
Ben & Jerry’s
Café Sol
Esquires Coffee Houses
Others
Total
Yum! Brands Inc
Four Star Pizza (Ireland) Ltd
Retail Food Group Ltd
Godfather’s Pizza Inc
Whitbread Plc
Burger King Holdings Inc
Fitzgerald Pub Group Plc
Starbucks Corporation
The Bagel Bar
Yum! Brands Inc
Dunne’s Stores Plc
Butler’s Chocolates
Brian McEniff Hotel Group
Unilever Group
Café Sol Ltd
Esquires Coffee International
Others
Total
Outlets
460
403
370
101
91
82
74
66
53
52
42
40
37
37
35
32
31
30
29
26
24
23
20
20
15
14
12
12
10
10
322
2,573
Source: official statistics, trade associations, trade press, company research, store
checks, trade interviews, Euromonitor International estimates; Euromonitor International (2009b).
24
The ‘Brewing’ of Insomnia
anticipating the arrival of the multinational behemoth Starbucks,
Insomnia accrued double digit growth in each location where
Starbucks opened beside them. In a survey where consumers were
asked to name the coffee shops in the Dublin area, 82 per cent of consumers named Insomnia spontaneously, without prompting, a figure
that is significantly higher than the 57 per cent who were spontaneously aware of Starbucks, indicating that Insomnia has managed to
secure a strong purchase on the Irish coffee consumer’s awareness
(Boucher and Kavanagh, 2007). Insomnia made a key marketing decision in positioning itself to be approximately 10 per cent cheaper
than its primary competitor Starbucks.
Insomnia also has competition among the retail sector. The boundaries between food service and retail have become blurred. In addition
to the food service sector responding to consumer demand for takeaway products, retailers also got in on the act. This mirrored UK
trends. Many convenience stores and petrol stations now have dedicated food service space in their outlets which is proving popular with
consumers. In fact, there is even more evidence in Ireland of the close
links between grocery retailing and food service, compared to the
UK. Operators from the grocery retail sector in Ireland, such as Spar
and Centra, enjoy top positions in current value sales among the
chained consumer food service players. Convenience stores widened
access to food service for consumers as these stores have a high penetration across the country and serve even remote areas where the
population density is often too low to support dedicated food service
operators. The sophistication and proliferation of deli counters in
convenience stores altered the food service market in Ireland in a
number of ways. This change in the market put pressure on food service operators to improve the quality of the food on offer while keeping
prices competitive. Euromonitor International (2009b) predicts that
the tough economic environment will contribute to intensifying this
trend into the future as consumers cut back on eating out and switch
to food service options from grocery retailers. More supermarkets
will add food service sections such as cafés as part of an overall strategy of providing more choice and improving the shopping experience
of customers.
Ever responsive to new trends, Insomnia entered the retail market
in 2006 through its agreement with Spar. Indeed, Euromonitor (2010)
predict that this move by Insomnia is likely to be copied by other
25
Managerial Challenges in Irish Organisations
comparable operators. This is further evidence of Insomnia’s pioneering nature. Currently, Insomnia’s two main competitors in the retail
sector are Bewley’s and Tim Horton’s, both of which provide selfservice machines. Insomnia has a number of advantages in this area,
not least of which is access to the convenience store channel through
John Clohisey’s relationship with Spar. Insomnia also offers Spar the
choice of two delivery modes, the barista concept and the bean-to-cup
self-service offer.
Irish consumers have shown a preference for home-grown products, resulting in Irish brands like Insomnia performing well in the
midst of stiff international competition (Euromonitor International,
2010). Insomnia has not been adversely affected by the arrival of
international competition; however, recessionary times have made
the market a lot tougher. The company responded quickly to the
changing economic temperature by being the first in the sector to
offer a value proposition to customers, demonstrating the leadership
position the company enjoys.
Insomnia introduced two highly successful offers which proved
very popular with customers and now account for 60 per cent of all
sales. These promotions were accompanied by the catchy taglines
‘Real Economic Leadership’ and ‘Affordable Luxury’. The first was
the €5 ‘Any sandwich, any coffee, any time’ combination offer, which
has been much copied amongst competitors. The promotion was
hugely successful, with sandwich sales increasing by 40 per cent and
coffee sales increasing by 15 per cent. The offer of a coffee and a
muffin for €3.50 also proved to be a big hit with customers. These
promotions effectively reduced prices by 25 per cent. Commenting on
2008 sales, CEO Bobby Kerr said, ‘Had we not introduced these very
aggressive promotions, our sales would have declined on last year. It
is encouraging for us to see new customers come through the door
because we are running good promotions.’ This shows how Insomnia
combines marketing innovation with the right products to meet the
tastes – and wallets − of Irish consumers.
In order to deliver these price reductions to consumers, Insomnia
undertook an extensive review of the business and cut costs by 15 per
cent. The company reorganised, took some distribution vans off the
road and cut senior management bonuses. Insomnia has grown to a
scale where it has influential purchasing power, which ensures competitive pricing. The company put this purchasing power to good use
26
The ‘Brewing’ of Insomnia
to achieve cost reductions with its landlords and suppliers. Insomnia
renegotiated its rents, which represent a significant element of expenditure for companies of this type. The most significant re-organisation
was the closure of the company’s central production unit. Up until
2009, all sandwiches and fruit cups were made in a 1,500 square foot
central production unit in Rathmines. While this unit offered the company a high degree of control over the quality of its food offering, its
location limited Insomnia’s regional reach. In January 2009, the company closed this unit, making a considerable saving. Food production
was outsourced to a supplier to which Insomnia gave all its in-house
recipes and with which Insomnia collaborated for six months beforehand in order to ensure that Insomnia’s high standards were ­maintained.
This move streamlined the company’s business, allowing it to focus
purely on retail.
THE OVERALL INSOMNIA PRODUCT OFFERING
In Insomnia stores the approach is to provide something a little
different from what’s on offer elsewhere. Insomnia coffee is brewed to
order, for example, while wraps, sandwiches and cakes are all made to
in-house recipes. The chain holds exclusive supplier arrangements
and also stocks Pipers Crisps, which aren’t sold in other coffee shops.
Insomnia’s product development team undertakes specific product
reviews every six weeks.
The company is constantly innovating through its collaboration
with suppliers on research and development. Ten of Insomnia’s suppliers provide 40 per cent of its products. Insomnia’s philosophy is to
develop long-lasting relationships with suppliers. Indeed, Bobby Kerr
has been dealing with many of the same suppliers for twenty years.
The company has by now developed significant purchasing power
and can source quality products through exclusive arrangements
with suppliers. In 2007, the company sourced a renowned baker to
custom-make scones, which are delivered to Insomnia’s shops before
7.00 a.m., an approach they plan to further develop with other products. Insomnia maintains a close relationship with suppliers, meeting
regularly to work on product development. The company offered
quiches for a trial period; however, this product line was discontinued
due to lack of customer demand. Insomnia chooses suppliers carefully,
ensuring that they are best-in-class and aligned with the Insomnia
27
Managerial Challenges in Irish Organisations
brand. Examples include Lily O’Brien’s chocolates, Barry’s Tea and
Soup Café. Lily O’Brien’s won the Irish Exporters Association Food
and Drink Award in 2006.
Insomnia is committed to providing a high quality fresh food offer
and, as mentioned, sells sandwiches, soups, salads, pastries, cakes and
fruit cups. It has a range of gourmet soups made daily by the Soup
Café. The soups are all made from high quality ingredients, are very
low in fat and are quite quirky, with the meaty ones being more like
stew than soup. Customers can taste the soup before they buy. Soup
has become an important element of the Insomnia offer, now accounting for 15 per cent of sales in some shops. It has been a major success
in getting Insomnia established in the lunchtime market. There are
more than twenty-five different varieties of sandwiches on a selection
of eleven breads, providing even the most discerning consumer with
a cornucopia of lunchtime choice. Insomnia sells 3,000 freshly made
sandwiches daily, which are made to a high specification from inhouse recipes.
Coffee is the key product in Insomnia’s portfolio. The chain sells
four million cups of coffee annually, representing 60 per cent of sales.
It is also an aspect of the business that competitors would find difficult
to replicate. Insomnia, through its strategic partnership with Matthew
Algie (the UK’s largest independent coffee roaster), maintains the
quality and standard of their coffee inputs and coffee-making machinery.
Some of the benefits that Matthew Algie provides Insomnia with are
a unique coffee blend, barista training, expertise in choosing and
operating coffee machines and machine service support all year round.
Insomnia is Matthew Algie’s biggest customer in the Irish coffee
shop market. Overall, Insomnia is the supplier’s fourth biggest customer in the British Isles after Tesco, Marks and Spencer, and Prêt à
Manger. Matthew Algie has recognised the importance of the company as a customer by providing resources that it doesn’t necessarily
give to all its customers. For example, the supplier provides financial
support for two and a half salaries on Insomnia’s payroll; these are
the salaries of the coffee trainer, coffee auditor and Spar in-store
machine manager.
In order to ensure the best coffee, Insomnia uses Arabica beans,
which are the premium coffee beans. Arabica beans grow in mountain
regions over 800 metres above sea level where disease is less prevalent. These beans command a high value on the market as they are
28
The ‘Brewing’ of Insomnia
handpicked. After harvesting, the green coffee beans are exported to
coffee roasters where they can be mixed with other coffee beans to
form the desired blend. The beans are roasted to develop flavour and
aroma at a temperature of 218°C, which takes an average of sixteen
minutes. In 2004, Insomnia introduced roast-to-order coffee. Matthew
Algie roasts the unique Insomnia blend of coffee weekly, giving the
consumer a very high quality fresh product. The shorter the time
between roasting and serving, the fresher, smoother and fuller flavoured the taste. For example, if coffee is ordered by Insomnia on a
Monday, it is roasted on Tuesday and delivered to the shops on
Wednesday. The date of the coffee roast is displayed on the menu
boards so on any given day customers can see exactly the date on
which the coffee they are drinking was roasted. This is never longer
than a week ago.
After the roasted coffee beans are delivered to Insomnia’s shops,
they are then prepared for customers by highly skilled baristas. A barista
is someone who has expertise in the preparation of espresso coffee
drinks. These coffee sommeliers are highly skilled in coffee preparation and have a comprehensive understanding of coffee, coffee blends,
espresso quality, coffee varieties, roast degree, and espresso equipment
and maintenance. Insomnia employs a full-time coffee trainer so that
all of its baristas excel at what they do. Furthermore, coffee audits are
conducted weekly to ensure the quality and consistency of its coffee.
Indeed, branch managers’ incentives are linked to these coffee audits.
For branch managers’ incentive pay, 70 per cent is based on the gross
profit achieved and 30 per cent is based on the scores achieved in three
different audits, all of which are conducted by external partners. These
audits are the coffee audit, the mystery shopper programme and
the Hazard Analysis Critical Control Points (HACCP) audit, which are
weighted equally regarding managers’ incentive pay. The gross profit
target that managers are expected to achieve is 65 per cent. Thus,
Insomnia’s managers are highly motivated to drive sales, focus on customer service and serve top notch coffee in all shops.
Insomnia has used 100 per cent Fairtrade products since 2006,
beoming the first Irish coffee company to make the decision to
source all its coffee this way. In 2005, the company commissioned a
research programme to reproduce the same Insomnia taste from
Fairtrade producers and the blend was perfected after ten intensive
months of research and development and customer tasting trials.
29
Managerial Challenges in Irish Organisations
The new Insomnia blend is a mix of organic beans, mainly from the
Oromia Coffee Co-operative in Ethiopia, blended with coffee sourced
from Indonesia, Sumatra and Peru. Oromia was founded in 1999
with the mission of making its members economically self-sufficient.
The Co-operative works under an auction waiver which allows it to
export directly to speciality markets. Insomnia’s unique policy of
always serving a double shot of espresso in all its coffees is doubly
beneficial for Fairtrade producers. In 2009, Insomnia imported
89,100 kg of Fairtrade organic coffee, up from 40,000 kg in 2006.
Commenting on the introduction of Fairtrade products, Insomnia
CEO Bobby Kerr said:
We believe that this is a real win-win for all stakeholders. This
deal benefits coffee producers and we hope it will leave a sweet
taste in the mouths of our customers, staff and management.
Sourcing Fairtrade coffee is part of our commitment to ethical
trading and is an important part of our corporate philosophy.
(Insomnia, 2006)
Insomnia communicated their Fairtrade stance through ongoing PR
and marketing activities, targeting customers with the tonguein-cheek slogan ‘Insomnia coffee have introduced the “F” word…
Fairtrade’. Following the introduction of Fairtrade products, Insomnia
experienced a 20 per cent increase in sales. This shows that customers actively seek out companies that demonstrate corporate social
responsibility. Insomnia spent less than €10,000 announcing the
switch and achieved extensive media coverage, which totalled 158
press hits. The company continues to show its commitment to
Fairtrade by donating five cents per beverage sold to Fairtrade Mark
Ireland during Fairtrade Fortnight, which amounts to approximately
€10,000 annually. Despite the current recession, Euromonitor
International (2010) found that ethical consumerism continues to be
one of the most important characteristics of the retail landscape.
The company also packages and sells the unique Insomnia blend
so that the customer can enjoy the brand’s coffee at home. Insomnia
can grind the coffee for the customer to suit the machine they have
at home, providing that personal touch that the brand has become
known for. In 2007, Mary Ann O’Brien of Lily O’Brien’s chocolate
developed an exclusive range of organic chocolates and a hot chocolate drink for Insomnia. The introduction of hot chocolate has had a
30
The ‘Brewing’ of Insomnia
major effect on attracting younger people in greater numbers to
Insomnia, and the drink has become something of a teenage ritual.
Insomnia is now continuing to target teenagers with a new range of
iced drinks, hoping to turn them into coffee drinkers as they get older.
Insomnia continues to introduce new beverages in line with international trends. The most recent of these is ‘the flat white’, a strong
latte popular in Australia and New Zealand, which was launched in
September 2010.
THE FUTURE
It is 20 March 2010 as Bobby Kerr sips his cappuccino in the Insomnia
unit at St Stephen’s Green. In hindsight, the sale of the Newpark
Hotel at the height of the property boom now looks extremely fortuitous given the subsequent collapse of the property market. While the
liquidation of Penninn has put the internationalisation of Insomnia
on hold, it still left the company with a substantial cash injection. So
what is next for Insomnia?
CONCLUSION
The outlook isn’t entirely rose-tinted; Insomnia is subject to the same
challenges and inhibitors as any typical medium-sized business hoping to break through to the next level. The company faces multiple
challenges if it progresses its plans to expand internationally. As a
medium-sized business, and therefore a small team, expansion will
place the current organisational structure under pressure, particularly moving into new and foreign markets. The economic climate is
unfriendly to business development and will undoubtedly prove a
barrier to development abroad, at least in the short term.
As has been outlined, it is clear that coffee is a growth industry not
just in Ireland but globally. However, growth also attracts a multitude of canny investors, entrepreneurs and businesses on the hunt for
their next profitable venture. The stakes are high and competition is
fierce, with some of the most established and well funded international brand names vying for every single café latte with innovative
industry newcomers. The global economic downturn adds a further
edge as consumers examine every outgoing cent with keener fiscal
prudence. A key challenge for operators is to find suitable high ­footfall
31
Managerial Challenges in Irish Organisations
locations. However, the identification of smart locations has always
been a strong point of Insomnia, thanks largely to John Clohisey’s
influence and links with significant urban real estate and property
development players. However, rents and labour costs are high, resulting in steeper prices which must be passed on to the consumer.
Finally, Insomnia is currently focused on consolidating its position
in the Irish market. In addition to putting pressure on sales, the tough
economic climate is likely to cause consolidation in the Irish coffee
shop market, which thrived during the golden years of the Celtic
Tiger’s reign. The Irish coffee shop market is highly fragmented with
a lot of small chains and independent operators. Insomnia has reached
a scale where it is in a good position to take advantage of any acquisition opportunities that may arise. The company has established itself
as a dynamic and aggressive business, willing to step up in order to
meet the make-or-break challenges that arise from such competitive
conditions, which have been heightened by the tumultuous economic
climate.
QUESTIONS
1. Analyse the growth of Insomnia. What were the key factors behind
its success?
2. (a) What role has Bobby Kerr played in Insomnia’s development?
(b) Looking at the profiles of Insomnia’s directors in Appendix 1,
identify what each of these brings to the company and why this
is important.
3. At the time of the Penninn investment, what other financing options
did Insomnia have? Outline the pros and cons of each of the available options.
4. What are the benefits and risks of Insomnia’s decision to outsource
its food production?
5. What are Insomnia’s resources and competencies?
6. Conduct a SWOT (strengths, weaknesses, opportunities and
threats) analysis of Insomnia. What do you learn from this?
32
The ‘Brewing’ of Insomnia
7. Identify and explain the elements of Insomnia’s competitive
advantage.
8. (a)What challenges would Insomnia face if it were to expand
overseas?
(b) Do you think that Insomnia should re-visit the option of entering the Finnish market in the future? Explain your reasoning.
9. Outline the main strategic options open to Insomnia for the future.
Based on the options you have identified, what would you choose
to do and why?
10. Analyse the Insomnia brand. What do you perceive to be its key
strengths and how has the company leveraged these? What more
can the company do to take advantage of these strengths? In order
to answer this question fully, students should also refer to the company’s website at www.insomnia.ie.
11. Ireland’s economic recession has had a significant impact on the
coffee and sandwich retail sector. How does a company such as
Insomnia survive in such difficult times?
12. If you had the opportunity to make changes to Insomnia, what
would these be and how would you go about this task?
33
Managerial Challenges in Irish Organisations
APPENDIX 1
INSOMNIA’S DIRECTORS
Bobby Kerr, Chairman
Bobby Kerr is a veteran of the coffee business, having worked in the
sector for almost two decades. A graduate of DIT Cathal Brugha
Street, Bobby comes from a rich hospitality tradition and was chairman of the family business, the Newpark Hotel in Kilkenny, from 2001
until its sale in 2008. Bobby originally worked in catering on North
Sea oil rigs, later moving into event and stadium catering in Canada
and the USA. This was followed by a successful tenure as operations
and area manager for the contract catering division of the Campbell/
Bewley Group, leading to his promotion to the position of managing
director of the Bewley’s chain of companies, including the cafés, shops,
bakery and franchising. Bobby also worked with Bewley’s on the
development of its international business.
This extensive experience in international markets provided the
impetus to set up his own business, Perk, in 1999. His work in the US
and across Europe had exposed him to the growing global trend for
gourmet coffees and sparked several ideas. In Perk, Bobby resolved to
combine the best of both worlds with a European coffee influence and
a US-style food offer. He grew Perk to six shops before it was acquired
by Insomnia in 2004. He keeps a keen lookout for new entrepreneurial ventures as one of the five ‘dragons’ on the RTÉ programme
Dragons’ Den. In April 2010 Bobby Kerr teamed up with Anne and
Joe Barrett to re-open the popular Bang Café on Merrion Row where
he will lead the sales and marketing activities. Shortly after this
investment he changed his role from CEO of Insomnia to chairman
in order to give himself more time to pursue his other entrepreneurial
activities. Further details of Bobby’s business and entrepreneurial
interests can be found on his website: www.bobbykerr.com.
Harry O’Kelly, Operations Director
Harry O’Kelly is a UCD law graduate who owned and managed a
catering and services recruitment company in London for nearly six
years. Returning to Ireland in 1995, Harry bought Bendini & Shaw,
which he grew to five shops before selling it to Insomnia in 2002.
Together with Bobby Kerr, Harry brought extensive operational
experience and entrepreneurial drive to help fuel Insomnia’s growth.
34
The ‘Brewing’ of Insomnia
Chris Foxton, Chief Executive Officer
Chris Foxton is an accountant with extensive financial experience
across the software, property and food processing sectors. A former
financial controller of MobileAware, Chris and John Clohisey knew
each other, both having worked with notable accountancy firm Bastow
Charleton, and the pair made a joint decision to invest in Insomnia.
A key area of Foxton’s remit lies in developing the company’s strategic outlook with regard to property.
John Clohisey, Non-Executive Director
John Clohisey is a non-executive director and not involved in the dayto-day operations of the business. An accountant by profession, he
invested in Insomnia with Chris Foxton in 2004, having first been
exposed to retail during a period with accountancy firm, Paschal
Taggart. A multimillionaire retailer and a keen property market
player, John’s first entrepreneurial venture was the purchase of
H. Williams in the 1980s. He further consolidated his position as a
retail entrepreneur by expanding into the convenience retailing
arena. BWG Foods owned the Spar franchise and Clohisey built up an
extremely profitable business, eventually directly owning 110 Spar
shops. His preferred approach lay in the identification and acquisition
of prime retail sites which he then rented to an owner−manager.
John Clohisey was a key operator in the management buyout of
BWG from Pernod Ricard in 2002. He is now a major shareholder in
BWG Foods, which continues to hold the Irish Spar and Mace franchises. He has been hugely instrumental both in developing Insomnia’s
relationship with Spar and around the early identification of new
opportunities with key landlords and property developers.
35
Managerial Challenges in Irish Organisations
APPENDIX 2
KEY COMPANY MILESTONES
1997Founded by four Irish independently successful entrepreneurs when new trends were emerging in the USA
and Europe.
First unit opens in the Hughes & Hughes bookshop in
Galway.
2001Bendini & Shaw acquired, bringing the total Insomnia
outlets to ten.
2004Investment by John Clohisey (Spar) and Chris Foxton.
Perk Cafés acquired bringing the total Insomnia outlets
to fifteen.
Introduction of roast-to-order coffee.
2005
Founding shareholders exit.
2006
Relationship with Spar commences.
Introduction of 100 per cent Fairtrade products.
2007
New central production unit opened in Rathmines.
2008Icelandic conglomerate Penninn purchases a 51 per cent
stake in the company, valuing Insomnia at €16 million.
2009Penninn goes into liquidation. All assets, including its
51 per cent stake in Insomnia, are currently owned by
the Icelandic bank Kaupthing.
Insomnia closes central production unit and switches to
outsourcing food.
2010
36
Number of Insomnia stores now stands at fifty-nine.
The ‘Brewing’ of Insomnia
REFERENCES
Allegra Strategies (2008), ‘Latest Trends Impacting the UK & European
Coffee Shop Market’, London, May.
Allegra Strategies (2007), European Coffee Shop Market 2007: Strategic
Analysis, Country Report: Scandinavia and Republic of Ireland, London,
October.
Boucher, L. and Kavanagh, L. (2007), Insomnia Coffee Company Marketing
Development Programme, Michael Smurfit School of Business, UCD.
Central Statistics Office (2010), Live Register: May 2010.
Euromonitor International (2010), Hot Drinks in Ireland: Country Market
Insight, March.
Euromonitor International (2009a), Insomnia Coffee Co. – Consumer
Foodservice Ireland: Local Company Profile, November.
Euromonitor International (2009b), Consumer Foodservice – Ireland:
Country Market Insight, November.
Euromonitor International (2008), Consumer Foodservice in Ireland,
November.
Insomnia, (2008), ‘Icelandic Group Buys Majority Stake in Insomnia
Coffee Company’, press release, 18 January 2008.
Insomnia (2007), Operations Manual.
Insomnia (2006), ‘Insomnia and Fairtrade Sign Record Deal’, press
release, 6 September 2006.
Leatherhead Food Research (2009), Global Food Markets: Coffee Ireland,
UK, July.
Spar (2009), www.spar.ie/sparireland.html, accessed 7 December 2009.
37